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At midday: TSX climbs, U.S. markets give back early gains

The bellwether VIX, the index of implied volatility of U.S. stocks, is close to an all-time low.


The Toronto stock market was slightly higher Tuesday amid news that the board at Botox-maker Allergan has unanimously rejected an improved takeover offer by Quebec-based Valeant Pharmaceuticals.

The S&P/TSX composite index jumped 4.04 points to 14,865.45.

The Canadian dollar was almost unchanged, up slightly by 0.04 of a cent to 91.64 cents (U.S.).

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Allergan says Valeant's offer undervalues the California-based company and creates significant risks and uncertainties for its shareholders.

Earlier this month, with the backing of activist shareholder Bill Ackman, Valeant raised its stock-and-cash bid to about $180 (U.S.) per share, valuing Allergan at more than $54-billion.

Allergan repeated its claim that Valeant has an unsustainable business model that relies on "serial" acquisitions and cost reductions, as opposed to revenue growth and operational excellence. Shares in Valeant faded six cents, or 0.43 per cent, to $137.43 on the Toronto Stock Exchange.

Ian Nakamoto, director of research at 3MACS, says the TSX is now on a course where it's a slow "grind up," with nothing expected in sight that might derail it.

"The easiest path for the markets seems to be up," he said. "It's not moving by leaps and bounds, just gradually up. The path to least resistance is up because momentum is with the stock market."

Nakamoto said talk about a correction in the Toronto market is unlikely. Instead, Nakamoto said he wouldn't be that surprised if the TSX surpasses its record close of 15,073, reached on June 18, 2008, just before the economic recession.

Meanwhile, in the U.S., Wall Street took back some gains, as the Dow Jones industrials dropped 18.82 to 16,924.28, the Nasdaq fell 4.41 points to 4,336.72, while the S&P 500 index dipped 2.43 points to 1,948.84.

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The U.S. Commerce Department says U.S. wholesale businesses built up their stockpiles of goods in April, a sign that companies expect stronger economic growth in the coming months.

The department says wholesale stockpiles expanded 1.1 per cent in April, following a 1.1 per cent gain in March. The result marks 10 straight months of rising inventories.

Sales at the wholesale level climbed 1.3 per cent, led by autos, furniture and pharmaceutical drugs. Sales rose 1.6 per cent in March. Year-over-year, sales are up 6.7 per cent.

Equities markets have been optimistic in recent sessions as signs indicate that global economies are faring well, or central banks were poised to pump more stimulus to ensure they do.

Last week, the European Central Bank announced that it was going to deal with the threat of deflation and give some lift to a tepid economic recovery in the eurozone by cutting its lending rate to 0.15 per cent from 0.25 per cent and dropping its overnight deposit rate to minus 0.1 per cent from zero.

There's also been signs of strong first quarter growth in Japan, an improvement in China's exports and a solid U.S. jobs report for May.

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Meanwhile, in Canada, a survey by international human resources firm Manpower Inc. suggests about 20 per cent of Canadian companies expect to add to their payrolls in the third quarter.

But when factoring in seasonal variants, Manpower says that figure falls to 10 per cent. Overall, four per cent of firms that expected to shed workers in the July-September period.

No other Canadian economic releases are scheduled for Tuesday.

Commodities were mostly higher as the July crude contract on the New York Mercantile Exchange was up 24 cents to $104.65 (U.S.) a barrel. August bullion rose $7.20 to $1,261.10 an ounce and July copper gained a penny to $3.05 a pound.

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